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Investing.com -- Western Digital shares are up 3.4% in premarket trading on Wednesday after Morgan Stanley elevated the stock to its Top Pick, citing confidence in the company’s technology roadmap and capital return plans.
“Following management meetings, we gained increased confidence in WDC’s tech roadmap, and walk away more confident that WDC’s 20%+ valuation discount vs. peers is unwarranted,” Morgan Stanley analysts wrote.
The bank lifted its price target to $99 from $92.
Morgan Stanley said hard-disk drives (HDDs) remain the most attractive end-market within its hardware coverage.
“Despite significant stock outperformance vs. the rest of our group, HDD’s remain the most attractive short-and-longer-term investment opportunity in our Hardware coverage,” the note stated.
The analysts pointed to Western Digital’s technology progress, particularly in energy-assisted magnetic recording (ePMR) and UltraSMR products, which can reach up to 36 terabytes.
“The single most important data point illustrating that CSPs are comfortable with WDC’s technology roadmap remains — WDC has demand visibility through a combination of firm purchase orders and LTA’s from their largest customers into C2H26,” the bank said.
Morgan Stanley also highlighted capital allocation priorities. “Buybacks are the name of the game as WDC trades at a >20% discount to peers, and our meetings with management last week confirm WDC is materially ramping buybacks in F2Q26 and beyond,” analysts noted, adding that dividends are likely to follow.
The report also pointed to increasing investor interest in Western Digital and greater potential upside compared with Seagate Technology, which previously held the bank’s Top Pick designation.